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By Edward Parsons, CPA · licensed since 2009
Key takeaways
- At H&R Block the answer depends on the product. The federal forms lists H&R Block publishes for its personal Online and desktop programs don’t include Form 8621. Its expat do-it-yourself product lists Form 8621 as an add-on form.
- H&R Block’s own article on Form 8621 for expats says it doesn’t recommend filling out the form on your own.
- Even where the form is offered, H&R Block’s pages don’t say whether the Part V figures are computed from your transactions or typed in by you. Ask before you rely on it.
- A loss on one block of PFIC shares doesn’t offset a gain on another under section 1291. Tax software nets gains and losses on Schedule D, so the 1099 entries alone can understate the tax.
- Whichever H&R Block product you use, the Part V figures have to be worked out block by block first, gains and losses kept apart. The PFIC Calculator & Form 8621 Generator is built for that.
“Does H&R Block do Form 8621?” sounds like a yes-or-no question. At H&R Block it isn’t, because the company sells several do-it-yourself products and its own pages answer differently for each of them.
This guide sorts out which H&R Block products say what about Form 8621, what even the best answer leaves to you, and one trap that catches people whichever program they use.
Does H&R Block’s tax software support Form 8621?
It depends on which product you have.
| H&R Block product | What its own pages say about Form 8621 |
|---|---|
| Online (Free, Deluxe, Premium, Self-Employed) | Each edition’s published list of included federal forms doesn’t include Form 8621. The lists don’t say they are complete. |
| Desktop tax software | The published federal forms list doesn’t include Form 8621. The software license itself says the software does not support all tax forms. |
| Desktop Premium & Business | The business forms list includes Form 8621, for business returns: corporations, partnerships, non-profits and trusts. Not for a personal Form 1040. |
| Expat do-it-yourself filing (online) | Lists Form 8621, for PFICs, as an additional form with its own fee. |
So if you file a personal return with H&R Block Online or the desktop program, the forms lists give no sign that Form 8621 is there. H&R Block’s help pages say its online program supports most federal forms, and point to its Tax Pro Review option for forms the online product doesn’t support. They don’t name Form 8621 either way.
If you live abroad and use H&R Block’s expat product, Form 8621 is on the list. My guide to tax software for Americans abroad compares it with the other expat programs, and which tax software supports Form 8621 sets every program side by side.
What does H&R Block itself say about doing Form 8621 yourself?
Its own article on Form 8621 for Americans abroad is blunt: “we don’t recommend you try to fill out this form on your own.” A second H&R Block article, on PFICs and foreign mutual funds, tells readers who hold PFICs to leave the reporting to its tax professionals.
That is a tax software company telling its own customers that this form is not a do-it-yourself job. It matches what I see. Form 8621 is a calculation problem that happens to come with a form, and the form is the only part a program can show you.
If the form is offered, what is still left to you?
H&R Block’s expat pages list the form. They don’t say how its Part V figures get there.
That is the question to ask any program, and it has three possible answers. The program prints a blank form, or it gives you boxes to type into, or it computes Part V from your purchase and sale history. Only the third does the work. For a fund taxed under the default rules of section 1291, the work is:
- a 125% test for each block of shares, against what that block received in the three prior years;
- an allocation of the excess across every day you held the shares;
- tax on each prior year’s share at that year’s top rate;
- interest on each of those amounts, compounded daily at the IRS rate for each quarter under section 6621.
If the honest answer is “you type it in”, the figures have to come from somewhere first.
Can a loss on one lot cancel a gain on another?
Not under section 1291. This is the trap that catches people whichever program they use.
When you sell part of a fund, your broker’s 1099 shows the sale lot by lot, and tax software nets the gains and losses on Schedule D the way it would for any investment. A PFIC taxed under the default method doesn’t work that way. The Form 8621 instructions say a gain on a section 1291 fund is treated as an excess distribution, and that a loss on the fund is not taken into account under section 1291. It does not reduce the gain subject to section 1291. The loss may still count under another part of the tax code, which is its own question.
So picture two blocks of the same fund, one sold at a gain and one at a loss. On Schedule D they may net to almost nothing. Under section 1291 the gain block is still a full excess distribution, spread over its holding period, taxed at the top rate for each prior year and charged interest. The netted figure from your 1099 is not the figure that carries the tax.
My guide to the PFIC excess distribution regime explains how a gain is treated under the default rules.
What should I do before I file?
- Check whether the fund is a PFIC. Start with whether your foreign mutual fund is a PFIC and the free PFIC Analyzer.
- Check which years need a form. My guide to who must file Form 8621 covers the rules, and the $25,000 and $50,000 exception relieves some years and not others.
- Work out Part V block by block, gains and losses kept separate, before any figure goes into a program. The PFIC Calculator & Form 8621 Generator handles sales lot by lot, runs the 125% test, the allocation, the rates and the interest, and fills in the official Form 8621 for each fund and year, with workpapers showing every figure.
- Then settle how the result reaches your return. Part of it is income, part is added to your tax, and the interest goes on its own line. The dividends and sales already on your 1099 have to be reported consistently with it.
If you hold your funds abroad, my guide to what goes on the FBAR for foreign funds covers the other forms the same fund can trigger.
Glossary
- Section 1291 fund: a PFIC taxed under the default rules, with no QEF or mark-to-market election in effect.
- Excess distribution: the part of a year’s distributions above 125% of the average for the three prior years. A gain on sale is treated as one.
- Block of shares: shares bought on the same date, with one holding period. Each block is tested and allocated on its own.
- Schedule D: the form where capital gains and losses are netted on a personal return. A gain on a section 1291 fund isn’t taxed as a capital gain.
- PFIC: a passive foreign investment company, including most foreign mutual funds and ETFs. See what a PFIC is.
Frequently asked questions
Does H&R Block Online support Form 8621?
The lists of federal forms H&R Block publishes for its Online editions don’t include Form 8621, though the lists don’t say they are complete. H&R Block points to its Tax Pro Review option for forms the online product doesn’t support.
Does H&R Block’s desktop software support Form 8621?
For a personal return, its published federal forms list doesn’t include Form 8621, and the software license says it does not support all tax forms. The business edition lists Form 8621 for business returns such as corporations, partnerships and trusts.
Does H&R Block’s expat product do Form 8621?
H&R Block’s expat do-it-yourself product lists Form 8621, for PFICs, as an additional form with its own fee. Its pages don’t say whether the Part V figures are computed from your transactions or typed in.
Does H&R Block recommend preparing Form 8621 yourself?
No. H&R Block’s own article on Form 8621 for expats says it doesn’t recommend filling out the form on your own.
Can a PFIC loss offset a PFIC gain?
Not under section 1291. The Form 8621 instructions say a loss on a section 1291 fund is not taken into account under section 1291 and does not reduce the gain subject to it. Tax software nets gains and losses on Schedule D, so the netted 1099 figure can understate the tax.
Where do I get the Form 8621 figures?
From a tool built for the section 1291 calculation that works block by block and shows its work. The PFIC Calculator & Form 8621 Generator does that and fills in the official Form 8621 for each fund and year.
Start with the blocks, not the boxes. Check the fund with the free PFIC Analyzer, then let the PFIC Calculator work out Part V, block by block, before you decide what goes into any program.
H&R Block is a trademark of its owner. This guide is not affiliated with or endorsed by H&R Block. Product features are described from H&R Block’s own pages as of this writing and can change.
